The effects of Malaysia's new foreign exchange controls are making themselves felt amongst Hong Kong's banks, with Hang Seng Bank announcing it would pay any shortfalls suffered by Malaysian ringgit time-deposit holders due to early termination of their accounts. In yesterday's announcement, the bank said the decision to terminate the accounts early was because all interbank treasury positions had to be closed out by September 9. The decision comes after the Hong Kong Association of Banks issued a circular earlier this month recommending banks terminate and settle their outstanding ringgit positions. A spokesman for Hang Seng Bank declined to reveal how much money was involved but said: 'It was not a big sum in comparison to the bank's assets.' 'Outside of the major currencies, regional currency deposits are likely to be insignificant,' said analyst Zuhair Khan of Clarion Securities. Mr Khan said: 'It would be a good marketing strategy to make people feel their money was safe and to re-enforce its quality customer service image.' Hang Seng Bank said it would meet the difference as a gesture of goodwill towards customers. A treasurer at one of Hong Kong's smaller banks said it was unlikely that others would follow suit, adding that it would ultimately depend on their ringgit exposure, which was likely to be very small. Mr Khan said that as the smaller banks were not so customer-service orientated, they were unlikely to offer to cover the shortfalls. Malaysia implemented stringent exchange controls this month in a bid to prevent an outflow of funds as the country started to cut interest rates. The consensus amongst the leading international financial markets was to close out all outstanding ringgit treasury positions by September 9 and settle with US dollars. Hang Seng Bank recommended that its customers terminate their deposits on September 8, a day before the deadline, at an exchange rate of US$1 to M$4 (about HK$8.15), the rate adopted by other banks in Hong Kong, London and New York. 'We took note of the fact that the premature uplift of the ringgit time deposits was made inevitable as a result of the exchange controls imposed by the Malaysian Government, and this arrangement should be treated as an exception,' the Hang Seng Bank spokesman said. Hang Seng Bank said it neither imposed any penalty on customers nor made profit from the early terminations of ringgit time deposits.